Exiting the European Union: The Department for Environment, Food & Rural Affairs and the Department for International Trade Contents

1Progress, resources and capability

1.On the basis of a report by the Comptroller and Auditor General, we took evidence on 7 March 2018 from the Department for Environment, Food & Rural Affairs (Defra) and the Department for International Trade (DIT) about the two departments’ preparations for EU Exit.1 Defra is responsible for 43 of the 300-plus workstreams across government, the second highest number of any department.2 DIT has responsibility for eight of the workstreams.3

2.Defra’s workstreams vary in scope and scale from straightforward rewording of existing guidance to establishing entirely new domestic regulatory regimes. Almost half of Defra’s workstreams have an IT element and many of these are still at an early stage of development. Its work includes setting up a new framework and systems for regulation of the chemicals industry, establishing a system to make payments to farmers, working with the devolved administrations to establish a new UK agricultural policy, and replacing an existing EU system for customs clearance of imports of animals and animal products.4 DIT’s work includes planning for the UK’s independent membership of the World Trade Organisation and the Government Procurement Framework and setting up a trade remedies organisation and a trade disputes framework.5

3.Both departments have received significant additional funding for their EU Exit programmes. HM Treasury approved spending of £94 million for Defra’s EU Exit programme in 2017–18 but, at the same time, Defra was aiming to deliver efficiency savings of £105 million.6 By early March, it had filled 1,100 of its 1,200 additional EU Exit posts.7 DIT’s budget for 2017–18 was £374 million, a 2.7% increase on the previous year. Its staff numbers grew from 2,504 in June 2016 to 3,745 in October 2017.8

4.On 19 March 2018, DExEU published the ‘Draft Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community’. The draft agreement includes a transition period running to 31 December 2020. DExEU stated that the UK and EU negotiating teams aim to finalise the entire Withdrawal Agreement by October 2018.9

Funding uncertainty

5.At the time of our evidence session in early March 2018, HM Treasury had not yet informed departments of the funding that would be available to them for 2018–19. Both departments said they were in negotiations with HM Treasury and hoped for confirmation soon. The Treasury Officer of Accounts told us that it expected to make an announcement within two weeks and indeed the funding levels for each department were announced on 13 March at the time of the Chancellor’s Spring Statement.10 £310 million was allocated to Defra and £74 million to DIT for their 2018–19 EU Exit programmes.

6.Although agreement had not yet been reached at the time of our oral evidence session, Defra told us that it was confident of being able to resource the things that it needed to deliver, and that rolling forward the costs of people already recruited into 2018–19 would be covered. Defra was also considering what work it could do at risk, if necessary.11 DIT told us that it was in discussion with HM Treasury at the time of the evidence session. DIT explained that its work would need to continue for many years ahead although, in the written statement, funding was only confirmed for 2018–19.12

Delays and delivery optimism

7.Defra told us that it is confident it will have sufficient funding from HM Treasury to deliver its EU Exit programme, and that it would be ready for a ‘no deal’ scenario in March 2019 with contingency plans in place.13 However, we also heard evidence of delays in key areas. Defra’s Secretary of State told the Environment, Food and Rural Affairs (EFRA) Committee in September 2017 that Defra’s White Paper on Fisheries would be published by Christmas 2017, but this had yet to be published at the time of our evidence session.14 We challenged Defra on this delay and were told that discussions on the content of the White Paper across government and with the devolved administrations had delayed its publication. Defra told us it hoped to publish it shortly, but in light of the fact that it intends to introduce the Fisheries Bill shortly after Easter, the delay will limit the time available for public consultation on this key policy area.15

8.DIT told us it was confident that it was in a strong position to deliver ‘operational trade policy’ on day one following EU Exit. However, it also made clear to us that it had to be realistic and that other factors (for example, the legislative timetable and the actions of third parties in the case of Free Trade Agreements) might impact on its ability to deliver an effective trade policy. As evidence of this, it attributed adjustments in some workstream milestones to changes in the legislative timetable. DIT told us it has built flexibility into its plans to mitigate these risks as far as possible.16

9.In response to our questions on progress with securing new trade agreements, DIT told us that it is currently focusing on ensuring continuity of approximately 40 trade agreements the EU currently has (or will have) with countries outside the EU and that the UK wants to maintain after it exits the EU.17 The Department said it was seeking ‘substantial equivalence of outcome’ and that it had been clear with the third countries concerned that the aim was to maintain the status quo.18 It also told us that in March 2019 the UK would no longer be party to these agreements unless their continuation was negotiated bilaterally or unless a mechanism was agreed by which the UK could remain part of these agreements during a transition phase. When challenged as to whether this could result in a loss of trade in March 2019, DIT told us it was working to ensure the UK was not in that position.19

10.We also asked DIT to give its assessment of the feasibility of a quick trade deal with the US and raised our concerns that public expectations about what could be achieved may be unrealistic.20 The Department was not aware of any concern that the public has an unrealistic expectation, making the argument that the government has not yet decided on its position with regards to a possible free trade agreement with the US and therefore it would be premature to start to prepare the country for something not yet known.21 On whether a deal could be done quickly, DIT said that, provided there was “genuine political commitment from both sides”, a deal can be done in 18 months and pointed to the US’s NAFTA deal with Canada and Mexico that had been reached in roughly that timescale.22

Delivering Defra’s EU Exit programme alongside its efficiency savings

11.Within its substantial portfolio of 43 EU Exit-related workstreams Defra told us its high priority projects include ensuring a functioning import control system for animals and animal products, establishing a new chemical registration system to replace the EU’s Registration, Evaluation Authorisation and Restriction of Chemicals (REACH) regulation and managing the enforcement of our fisheries controls.23 We asked the Department about the consequences of failing to deliver any of these workstreams and it acknowledged that the consequences would be ‘very serious’.24

12.In addition to its EU Exit programme, Defra has a substantial domestic policy agenda, including responsibility for maintaining the UK’s resilience to floods, and protecting the UK from animal and plant diseases and other environmental crises.25 The Department also told us that it remains committed to its spending review targets, including achieving savings of £138 million in 2018–19. It aims to achieve these through a range of measures including consolidation of its corporate services and a programme to improve the efficiencies of its farm visit programme by reducing the need for more than one agency to visit the same farm.26

13.In light of the grave consequences of failing to deliver its EU Exit programme, we challenged Defra on what areas of work it had deprioritised to enable it to deliver its EU Exit programme successfully. The Department outlined how its EU Exit programme has been reviewed to ensure that critical projects that need rapid intervention are prioritised but, beyond some staff redeploying from areas that would not be required after EU Exit, it did not give us any examples of non-EU Exit work that had been cut or de-scoped to make headroom.27

Risks to Defra’s IT delivery

14.Defra told us that 20 of its 43 workstreams have an IT component, with four projects requiring some element of build in a no-deal scenario, the two most significant of which are an import control system to facilitate trade in animals and animal products, and a system for the registration and authorisation of new chemical products.28

15.The previous Committee reported in 2016 on failures in Defra’s delivery of the Common Agricultural Policy Delivery Programme (CAP-D)—an IT system designed to administer payments to farmers under the Common Agricultural Policy.29 In light of this track record, we expressed our concerns over Defra’s capacity to deliver these projects and challenged the Department on the progress it had made. In response, the Department told us that it has looked carefully at the lessons it could take from its experience of the implementation of CAP-D, and stressed that its most complex project—the new import control system for animals and animal products—was ‘significantly less complex’ than the CAP-D system.30

16.In terms of progress, we were told that in both cases (the import control system and the chemicals registration database), Defra has commenced the build process, and plans are in place for user testing later this year. Defra also told us that in the event of delays to these builds, it has built fall-back positions into its plans to be ready for a ‘no deal’ scenario in March 2019, which might include using some ‘manual workarounds’.31 The Department acknowledged that a ‘no-deal’ scenario would result in some ‘clunky fixes’ and some functions would not be performed ‘as slickly as they are at the moment’. Defra was open about the fact that a transition period (the draft Withdrawal Agreement, which includes a transition period to December 2020, had not been published at the time of our evidence session) would increase its confidence in its ability to deliver by enabling it to make changes over a longer time period, as well as providing more time to prepare businesses and people for the changes that would take place.32

Getting the right mix of skills and resources for DIT’s EU Exit programme

17.This Committee previously reported, in February 2018, that the civil service does not currently have the people and skills needed for EU Exit work. We had heard then about Cabinet Office’s concerns that “there could be an issue in the marketplace; we are competing for skills that are pretty rare.”33 Since the referendum, we have heard about the shortage of trade negotiators34 and this is a skill that the UK has not required in the UK civil service for 40 years.35

18.Since DIT was established in 2016, its Trade Policy Group has increased in size from 100 when the Department was formed to 500 people in February 2018.36 About one third of these staff have come from outside the civil service. Some have particular skills, such as a ‘rules of origin’ expert.37 38 The Trade Policy Group is not currently doing any trade negotiations, but is working on the DExEU workstreams and developing trade policy.39 The Department has also recruited a Chief Trade Negotiator, with 25 years of trade negotiating experience.40

19.We challenged DIT on whether it had the staff in place with the right skills to carry out trade negotiations. The Department said it would ideally have some more experienced negotiators but also expressed a preference for “young, enthusiastic, talented, ready to go” staff, over “tired, old, re-used negotiators”. The Department told us that it now aims to develop the next level down from the Chief Trade Negotiator with a mix of recruitment and training existing civil servants.41

20.We asked DIT how long it would take to train people to be able to undertake trade negotiations.42 The Department told us that it is already training people through the new trade faculty that has been set up at the FCO’s Diplomatic Academy. Staff are also learning as they work on the DExEU workstreams. The Department explained that it has profiled different scenarios about the capability and number of staff it may need in the future.43 At present the Department is staffed to be able, in the next 12 to 18 months, to work on at least three new trade negotiations with countries that the government is known to be positive towards and a smaller number of the 40 free trade agreements that the UK needs to translate over from EU agreements.44

1 Report by the Comptroller and Auditor General, Implementing the UK’s exit from the European Union: The Department for Environment, Food & Rural Affairs, Session 2017–19, HC 647, 20 December 2017; Report by the Comptroller and Auditor General, Implementing the UK’s exit from the European Union: The Department International Trade, Session 2017–19, HC 713, 25 January 2018

2 C&AG’s Report (Defra), p 5

3 C&AG’s Report (DIT), p 5

4 C&AG’s Report (Defra), pp 5, 10

5 C&AG’s Report (DIT), p 5

6 C&AG’s Report (Defra), pp 16–17

7 Q 1 (Defra)

8 C&AG’s Report (DIT), p 9

9 https://www.gov.uk/government/publications/draft-withdrawal-agreement-19-march-2018

10 Q49 (Defra); Spring statement: Written statement (HCWS540), 13 March 2018

11 Qq 26 and 46 (Defra)

12 Q 38 (DIT)